Council Broaches Using Housing Levy, Proposed "Seattle Shield" Tax Funds to Backfill General Fund Shortfall

By Erica C. Barnett

During a recent discussion of a potential ballot measure that would increase the business and occupation tax for larger businesses and exempt gross revenues up to $2 million a year, Councilmember Maritza Rivera suggested that the city should not dedicate the new tax, if it passes, to housing and human services, but put the money in the general fund instead, where it could pay for anything from police to road repairs to prosecution.

The council sponsor of the proposal, Alexis Mercedes Rinck, has dubbed it the "Seattle Shield" proposal because, she says, it will help shield the city from some of the more devastating cuts from the Trump administration, by contributing about $90 million a year to critical safety-net services. Voters will "choose whether we protect each other or abandon each other," Rinck said when announcing the plan.

But, Rivera noted, the city is also facing a budget deficit of $250 million or more (the next revenue forecast will come in August.) "At the end of the day, you know, it begs the question: Why not just put all of this in the general fund?" Rivera said. "And as you're doing the budget process, then you're delineating where it goes, because we keep doing these funding sources, and then we are narrowing what we can use to spend with it."

The JumpStart payroll tax, for example, was originally passed to pay for services targeted toward people most impacted by the high cost of living for which big companies like Amazon are partly responsible; since its passage, however, the council has turned it into an all-purpose slush fund.

Rinck noted that the Trump cuts will likely include emergency housing vouchers, homelessness funding through the federal Continuum of Care, and funding for basic needs like food assistance. "The outlined areas in this legislation are intended to speak to where we are anticipating the cuts will be the deepest," Rinck said. Additionally, she said, "I think we need to be clear with voters about what we intend to use these funds for."

It's hard to say whether voters would find the idea of a tax that can be used for any purpose the council chooses appealing, but Seattle's other voter-approved levies and taxes are all for specific spending areas, so a business tax for the general fund would be a major departure from precedent.

Rivera also brought up another idea that has come up frequently in recent months, including on the 2025 campaign trail: Given that the Office of Housing is "sitting on" hundreds of millions of dollars it isn't currently spending, why can't the city just borrow some of "that housing levy money we're starting to collect now"?

Doing so would require the city to forego some future housing, Rivera acknowledged—the city can't encumber tax dollars from the housing levy to build housing in the future if that money has already been used to address the budget deficit the city is facing today—but that seemed to her like a sensible tradeoff.

"Nothing is getting built," Rivera said, "and this money is going to continue to come in. So if it's not being used today, we know money is continuing to come in, we can make good down the line, on the award or, you know, the investment. But we have needs today, and we have money sitting somewhere today—I'm not an accountant, but it seems to me that we should be able to" use that money now, she said.

Deputy Mayor Greg Wong noted that the housing levy funds, is "not a pot of money the executive has one to touch, because we want to maintain our promises and investments in affordable housing." By spending revenues from the housing revenue on general-fund purposes, the city would be breaking an implicit promise to voters when they agreed to tax themselves for housing.

And city budget director Dan Eder noted that it isn't true that affordable housing isn't getting built; last year, 1,300 new units of affordable housing were partly funded by housing levy dollars.

On its face, it seems somewhat absurd to think of the city asking voters for a new tax to backfill its budget deficit (a deficit exacerbated, last year, by $100 million in new spending the mayor and council hung on the budget like it was a Christmas tree), or for the city to use the housing levy, a voter-approved property tax for housing, to backfill the general fund.

But the city is entering unprecedented times, with federal funding cuts on the way that will force the mayor and council to decide between massive cuts to basic services (except police and prosecution, of course) and reneging on promises to voters about how the taxes they approved will be spent. It's always an easier decision for elected officials to cut long-term spending that won't pay off until years in the future than to make tough choices in the present. Just look at what happened to JumpStart.